menu the way we do taxes: How the new tax bill influences the nonprofit sector

Changes are coming our way. The new tax bill influences charitable giving on a fundamental level, which will change the way that we, nonprofit professionals, approach our work. Bear with me - the beginning of this post may seem boring, but it’s important to understand the basics before you can fully comprehend how the new tax plan influences the nonprofit sector.



Essentially, the standard tax deduction (more on that later) is almost doubling from the rate that it is at now. Currently the standard deduction is $6,500 for single households and  $13,000 for joint households (couples). The new tax plan increases the standard deduction to $12,000 for singles and $24,000 for joint households.


Single Households

Joint Households














There are two ways you can file your taxes. Itemizing your deductions means listing out expenses that you can deduct from your taxes. Some of these items include medical expenses, mortgage interest payments, student loan interest payments, and drumroll please...charitable donations! Why do this? Listing each of these items out decreases the amount of your income that can be taxed, which keeps more money in your pocket.


In lieu of listing out all of these items, you can instead choose to take the “standard deduction.” The standard deduction is a, you guessed it, “standard” dollar amount that can be chosen to decrease the amount of your income that can be taxed.


Easy - whichever saves you the most money. If the standard deduction is higher than your projected itemized deduction, you take it. This way your taxable income remains lower, and there is a lesser chance of making any mistakes on your tax filing. If it’s one thing we all know about taxes - YOU DON’T WANT TO SCREW THEM UP. Messing up your tax filing can lose you money if you forget to claim deductions, or you can end up owing the government money if you take too many deductions.


According to the most recent IRS data, for the 2013 tax year:


  • 30.1 percent of households chose to itemize their deductions (44 million returns).
  • 68.5 percent of households chose to take the standard deduction (101 million returns).
  • 1.6 percent of households had zero or negative adjusted gross income, and were unable to take any deductions. (2 million returns)
    *Statistics taken from

Analysts estimate that the number of households who itemize their deductions will decrease from 30% to 5% under the new tax plan.

Households in the “high income” tax brackets are far more likely to itemize their deductions simply because they pay more taxes on the federal and state level. Households in the “low income” tax brackets are more likely to take the standard deduction because they pay less in taxes, and their itemized deductions are less likely to be higher than the standard deduction.

Where things get muddy is in the middle-class income bracket. Depending on your spending in any given year, it may be more fruitful for a middle-class household to itemize OR take the standard deduction - it’s not as cut and dry.


As a person who throws money at someone to do their taxes for them, I understand the draw of a standard deduction. It’s easier, it might save you more money, and decreases the chance of making a mistake. Now that the standard deduction is higher more people are likely to take advantage of it - but with simplicity comes ambiguity.

Without the incentive to list out deductions, it makes it less attractive for people, specifically in middle-class income households, to take the time to sit down and outline all of their expenses each year. It is also arguable that with the standard deduction increasing by a whopping 84% it will disincentivize people to make charitable contributions in the first place.


While this definitely stinks, all is not lost. Technically, people can still deduct charitable contributions from their taxes, which means any messaging that you already use in your organizations to this effect is still valid. Unfortunately, it is far less likely under the new tax plan that people will choose to itemize their taxes, which makes messaging about the deductibility of nonprofit contributions less persuasive.

For individuals who still want the financial benefit of donating to charities, the concept of “bunching” has been thrown around as an option. This entails saving the money you would have given to an organization for a year, and then making double the contribution to reach the new tax threshold the following year. There are both pros and cons to this; the pro being that contributors still get the tax incentives they always have, the con being that 501c3s who depend on a constant stream of revenue may see new fluxuations in their income.


I want to leave you with one warm, fuzzy thought. Think about the organizations that you donate to - why do you donate to them? Because you can deduct the money from your taxes? While this is definitely a perk, it’s not the number one reason why most people give. Donors give to causes because they believe in the mission of the organization. Continue fulfilling your mission to the best of your ability, and communicating to your constituents about all the great work you do.



By reading this blog post you’re already starting off on the right foot. This article only skims the surface of the changes coming our way. If you want to dig in to all 1,097 pages of the new tax bill, you can find it in its entirety at this link. The best thing you can do is educate yourself on these changes so you are prepared when questions come your way. Below are some articles that I’ve found helpful. After all, knowledge is power.


Be the first to comment

Please check your e-mail for a link to activate your account.

get in touch

We'd love to hear from you! Email us or reach out to us on social media.

about us

Our mission, vision and values guide all that we do at the Young Nonprofit Professionals Network of the Twin Cities (YNPN-TC).

learn more

© 2006 - 2015 Young Nonprofit Professionals Network of the Twin Cities

Web Development: Metre

Photo Credit Marie Ketring (Unless Otherwise Specified)
Created with: NationBuilder